When Gov. Gray Davis took to the airwaves Thursday to explain how California was going to solve its energy troubles, PG&E Corp. Chairman Robert Glynn was one of the few who knew that things were about to get much, much worse.

Without telling the governor -- and contrary to later explanations -- Glynn had decided days earlier that Pacific Gas and Electric Co. would file for bankruptcy protection Friday morning, sources within the utility said.

Moreover, the timing of the move now seems to have been very deliberate.

PG&E, observers say, seized the opportunity to declare bankruptcy Friday so it could lay blame on the governor while also staying ahead of a breakthrough in Davis' separate bailout talks with Southern California Edison -- a deal that worked against PG&E's financial interests.

The behind-the-scenes picture taking shape is that PG&E apparently realized that it had no choice but to act on Friday.

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"We listened carefully to the (governor's) statement and the commentary that followed, and this decision is the result," Glynn said Friday of why PG&E had chosen to file for bankruptcy.

Davis felt he'd been ambushed.

The governor called Glynn on Friday night and expressed his deep disappointment over PG&E's actions. Sources said the call did not go well, and that a possibly insurmountable gulf had opened up between the state's top politician and the head of its largest utility.

"The governor was led to believe that we were dealing in good faith, and clearly that was not the case," Steve Maviglio, Davis' spokesman, said yesterday. "Instead of looking in the mirror, they pointed fingers."

As Glynn told it, PG&E's talks with Davis had broken down weeks earlier. "We've heard a lot of the words that have been involved but have not seen a lot of actions," he said.

By last week, the deal slowly taking shape between the utility and the state had ballooned to almost incomprehensible complexity.

What once had been a mere cash infusion for a troubled company now involved public acquisition of power lines and land, changes in California's regulatory laws, multibillion-dollar bond offerings and potentially huge rate increases for consumers.

Financial analysts who had been briefed on the status of the negotiations after the governor's Thursday speech said it appeared that Davis was ready to do virtually anything to keep PG&E from going bankrupt.

PG&E SMELLED WEAKNESS

But they said PG&E may have sensed that the governor had lost the political clout to sell to lawmakers what was shaping up to be a very generous deal.

"Although a reasonable deal could have been reached, it's unclear whether all the parties in the state would have signed on," said Paul Patterson, an energy-industry analyst at Credit Suisse First Boston in New York.

Sources familiar with the talks said the negotiations reached an impasse last month when PG&E demanded that the state Public Utilities Commission be reorganized so that it would have less oversight authority over the utility's activities.

Such a change would have given PG&E almost free rein to raise its 13 million customers' rates any time the utility saw fit, the sources said. One called PG&E's demand "a deal breaker."

PG&E spokesman Ron Low denied yesterday that such a condition had been sought. Rather, he said PG&E merely wanted written assurance that any agreement reached with the governor "could not be undone by the PUC."

Other sources cited a different turning point in the negotiations. They said the talks began to disintegrate several weeks ago when Davis criticized PG&E and other utilities for not making payments to smaller power companies that were struggling to get by.

"It is wrong and irresponsible of the utilities to pocket and withhold the money," the governor said. "It's immoral and has to stop."

PG&E's chief financial officer, Peter Darbee, reportedly told one of Davis' negotiators that Glynn "took it personally" when PG&E was called "immoral."

Whatever the reason, Glynn knew well before the governor's speech on Thursday that his utility was going to file for bankruptcy.

FILING 'READY TO GO'

"We had this thing ready to go long before that," acknowledged PG&E spokesman Greg Pruett.

Indeed, PG&E had hired bankruptcy attorneys from the New York firm of Weil Gotshal & Manges last August. Although the lawyers ostensibly had been retained to help keep the utility from going bankrupt, their mission shifted as PG&E sank deeper into debt.

By early this year, sources within the utility said, the attorneys had drawn up all necessary papers to file for bankruptcy at a moment's notice. The only question was the timing.

Many observers now believe that PG&E never intended to cut a bailout deal with the governor. The utility made no secret of its displeasure with having to sell off lucrative assets like power lines, land or dams.

Moreover, PG&E executives appeared to sincerely believe that they were entitled to recoup the entire $9 billion in debt accrued because of a rate freeze that prevented the utility from passing along sky-high power costs to customers.

They had faith in a lawsuit pending in federal court that seeks to overturn the rate freeze and allow full recovery of past expenses.

But time was against PG&E. The utility's Southern California cousin, Edison,

was holding its own bailout talks with Davis, and, unlike PG&E, had found the terms of the deal to its liking.

In February, Edison reached a tentative accord with the governor to sell its transmission lines to the state for nearly $2.8 billion.

Now, the negotiators say, a final deal may be just a few days away, including an agreement for Edison to drop its own lawsuit seeking recovery of past costs.

EDISON DEAL POSED PROBLEMS

If so, this would have been a big headache for PG&E. Among other problems, it would have been an enormous challenge, to say the least, to publicly defend pursuit of its federal lawsuit when Edison had announced that such legal tactics were unnecessary.

"It's possible they would be seen as a spoiler if Edison has a deal in place and then PG&E filed for bankruptcy," said CS First Boston's Patterson.

"They'd been looking at bankruptcy for months," he also said. "They looked at the political landscape and decided this was the best way to go."

The looming Edison deal added extra urgency to PG&E's bankruptcy timing. If PG&E waited until this week to file, it risked the governor announcing a final agreement with Edison as early as tomorrow.

Observers said that risk, as well as the opportunity for finger-pointing provided by Davis' Thursday night speech, gave PG&E almost no choice but to schedule its bankruptcy filing for Friday morning.

Once the filing date had been settled on, PG&E set the bankruptcy wheels in motion.

"These things take time to put together from the moment you decide to do it, " said PG&E spokesman Pruett.

BONUS HANDOUTS

Among other considerations, Glynn wanted to hand out bonuses and raises to about 6,000 managers and other employees at the utility and its parent company.

Such a move would be more difficult after the bankruptcy filing had been made. The bankruptcy judge could even forbid it.

Backtracking from a previous decision not to hand out bonuses this year, Glynn told PG&E workers in an internal memo late Thursday that he had changed his mind.

Bonuses and raises would be awarded, he said, because of workers' "efforts, teamwork and dedication during the past year, and particularly throughout the ongoing energy crisis."

Next, PG&E had to orchestrate the actual filing and its subsequent fallout. Securities regulators were informed that the company had an important announcement pending, and trading in PG&E's stock was immediately halted.

Employees were informed of the bankruptcy move in an e-mail message sent out at 9:30 a.m., followed by a town hall-style meeting in the corporate auditorium 15 minutes later.

Glynn and Gordon Smith, PG&E's chief executive, then spoke by telephone with reporters, followed by a full day of one-on-one interviews to hammer home the company's message.

CRITICISM OF NEGOTIATORS

In one such interview, Glynn reiterated to CNBC that "the governor's negotiators have moved away from previous agreements that we had reached with them."

He also faulted state regulators for having taken "negative actions" that jeopardized PG&E's financial position -- an unusual argument for a utility already $9 billion in the hole.

Meanwhile, the company's spinmeisters issued "talking points" for employees so they too could communicate PG&E's stance. It advised them to say bankruptcy was "in the best interests of our customers, employees, suppliers, debt holders and shareholders."

Going forward, PG&E has two weeks in which to compile all the necessary paperwork supporting its filing, and will then schedule subsequent developments with Federal Bankruptcy Judge Dennis Montali.

The process, which could last years, ultimately will provide a framework for PG&E's creditors to recover at least a portion of the money owed them, and will allow the utility to continue operating in an otherwise normal manner.

PG&E said it foresees no disruptions of service or layoffs of employees.

RATES COULD SKYROCKET

However, customers' rates could go through the roof if the bankruptcy judge decides that consumers should shoulder the utility's $9 billion debt burden.

In the meantime, PG&E is continuing efforts to persuade customers to use less power in the face of severe electricity shortages this summer, including TV ads promoting conservation.

One such ad is scheduled to run in the Bay Area tonight during a showing of "The Ten Commandments," in which Moses leads his people through the desert and to the promised land.

Glynn, now leading his company through the wilderness of bankruptcy, can only be hoping to be as fortunate.